Tapestry (TPR) Q4 Earnings Top Estimates, Gross Margin Expands

Core Insights - Tapestry, Inc. reported fourth-quarter fiscal 2024 results that exceeded revenue and earnings estimates despite a challenging consumer environment, although both metrics showed a year-over-year decline [1][2]. Financial Performance - Adjusted earnings for the fourth quarter were 92 cents per share, surpassing the Zacks Consensus Estimate of 88 cents but down from 95 cents in the prior year [2]. - Net sales reached $1,591.1 million, beating the consensus estimate of $1,572 million, but reflected a 2% year-over-year decline [2]. Customer Engagement - Throughout fiscal 2024, Tapestry attracted 6.5 million new customers in North America, with over 50% belonging to Gen Z and millennial demographics, indicating successful engagement strategies [3]. Brand Performance - Coach's net sales were $1,250.4 million, flat year-over-year; Kate Spade's sales were $290.1 million, down 6%; and Stuart Weitzman's sales totaled $50.6 million, down 19% [4]. - The Zacks Consensus Estimate for revenues from Coach, Kate Spade, and Stuart Weitzman was $1,224.4 million, $292.6 million, and $56 million, respectively [4]. Regional Sales Analysis - North America sales declined 1% year-over-year to $1,020.4 million; Greater China sales dropped 13% to $232.4 million; Japan sales decreased 9% to $127.4 million; while Other Asian markets saw a 9% increase to $86.2 million [5][6]. - European markets experienced a 26% increase in revenues to $92.3 million, driven by strong local consumer and tourist spending [6]. Margin and Operating Income - Consolidated gross profit was $1,191.2 million, up 1.6% year-over-year, with gross margin increasing by 250 basis points to 74.9% due to operational enhancements and reduced freight expenses [7]. - Adjusted operating income was $262 million, down from $273.6 million in the prior year, with adjusted operating margin contracting 40 basis points to 16.5% [8]. Store Operations - As of the end of the quarter, Tapestry operated 324 Coach stores, 197 Kate Spade outlets, and 34 Stuart Weitzman stores in North America, with international store counts at 606, 181, and 60, respectively [9]. Cash Flow and Financial Position - Tapestry ended the quarter with cash, cash equivalents, and short-term investments of $7,203.8 million, long-term debt of $6,937.2 million, and stockholders' equity of $2,896.9 million [10]. - Operating cash flow for fiscal 2024 was $1.26 billion, up from $975 million in the previous year, while free cash flow reached $1.15 billion compared to $791 million in the prior year [11]. Future Outlook - Tapestry anticipates fiscal 2025 revenues to be around $6.7 billion, indicating growth despite an estimated 50 basis points of currency headwinds, with a projected operating margin expansion of about 50 basis points [12]. - Management guided fiscal 2025 earnings between $4.45 and $4.50 per share, reflecting mid-single-digit growth from the prior year, including a 35 cents negative impact from the suspension of share repurchases [13].